Subcommittee on Japan's Role in International Society (Second Meeting)

Thursday, March 28, 2002

Meeting Agenda

Matters concerning Japan's role in international society

After a statement was heard from Mr. HATAKEYAMA Noboru concerning the above matters, questions were put to him; this was followed by discussion among the members.

Informant

Members who put questions to Mr. HATAKEYAMA


Main points of Mr. HATAKEYAMA's statement

1. Free Trade Agreements (FTAs)

(a) Definition
>> According to the economist Bela Balassa, regional economic integration can be represented as a five-step "staircase": (i) the free trade area, within which tariffs and nontariff barriers are eliminated; (ii) the customs union, whose members eliminate tariffs and other trade barriers among themselves while applying common tariffs to nonmember nations; (iii) the common market, with liberalized movement of production factors such as labor and capital; (iv) the economic union, with integrated macroeconomic policy; and (v) complete integration, including political integration.

(b) The World Trade Organization (WTO) and FTAs
>> In some respects, FTAs discriminate against nonmember nations, and thus they may infringe the WTO's core principle of nondiscrimination between domestic and foreign producers. The WTO recognizes FTAs under three conditions: (i) the FTA arrangements must apply to substantially all products; (ii) tariffs and other regulations of trade applied to nonmember nations must not be raised after the formation of the free trade area; and (iii) transitional arrangements leading to the formation of the FTA must be completed within ten years. However, there are no FTAs that meet these conditions, and none has yet been approved by the WTO.


2. The Spread of FTAs

>> The failure of the 1990 ministerial meeting in the GATT Uruguay Round demonstrated the difficulty of multilateral trade negotiations, and high hopes were placed on FTAs as a result. Again, after the European Union (EU) and its common market came into being in 1992, the United States, which had previously held that the EU's creation would lead to formation of an economic bloc, itself launched the North American Free Trade Agreement (NAFTA). This prompted the creation of a growing number of FTAs. Recent developments include the proposed Free Trade Area of the Americas (FTAA), the EU's negotiations with thirteen prospective new members, and talks with the ASEAN nations by China and the United States.

>> At present, there are 138 FTAs in effect. Only five of the world's thirty largest economies in terms of GDP do not belong to an FTA; they are Japan, China, ROK(South Korea), Taiwan, and Chinese Hong Kong. Japan is thus lagging behind in the worldwide growth of FTAs, although it has taken some steps in this direction, such as the Japan-Singapore Economic Partnership Agreement, which is being submitted to the current session of the Diet, and the agreement with the Republic of Korea to set up a joint study group.


3. Japan's Position

(a) Sole reliance on the WTO and consequent problems
>> Japan has taken the position that free trade should be promoted by the WTO because FTAs violate the nondiscrimination rule and lead to the formation of economic blocs. This has led to Japan's international isolation, delay in domestic structural reforms, missed opportunities to experiment with competition and trade in new fields, and actual losses of trade and investment.

>> In view of these concerns, I think that in future we should shift to a multilayered structure in which FTAs complement the WTO.

(b) Future issues
>> In the agricultural sector, while certain products should be protected for reasons of food security, it is important to liberalize the other products; transitional measures should also be fully utilized to buffer the impact of sudden changes.

>> The ministries and agencies responsible for economic and industrial affairs should take the lead in negotiating FTAs.

>> It is to be hoped that Japan will change its past approach to FTA negotiations, which have tended to be based on proposals made by the other side, and instead, with politicians providing leadership, will take the international initiative by actively negotiating FTAs.


Main points of questions and comments to Mr. HATAKEYAMA

ISHIKAWA Yozo (Liberal Democratic Party)

>> The EU and NAFTA are in the process of expanding, but what do you think is the right size for an FTA to function effectively?

>> As FTAs expand and come to involve closer ties, it is likely that the need will arise to take noneconomic as well as economic factors into account. Will there not be some questions that require constitutional study, such as those concerning state sovereignty?

>> When one compares the regional integration processes in the EU and East Asia, one can say that Europe, as a group of similar nations of similar size, was able to integrate readily. In East Asia, on the other hand, there are numerous problems to be resolved. They include conflicting interests among the nations of the region, mainly due to economic disparities; political issues arising from differences in political systems, especially with regard to China; and historical or cultural issues and unfavorable national sentiment caused by different historical perceptions of the war, among other factors. Japan's participation in such a process is likely to meet with considerable difficulty, is it not?

>> In the case of Europe, the NATO military alliance came first, followed later by the economic integration process. But when Japan contemplates taking part in a regional integration process in East Asia, the situation is different, as there is no preexisting military alliance. How is this point likely to affect the process?


NAKAGAWA Masaharu (Democratic Party of Japan and Club of Independents)

>> The Basic Law for the Federal Republic of Germany provides for a partial transfer of sovereign powers to international institutions. Should not such a clause be inserted in the Constitution of Japan?

>> You cited respect for the nondiscrimination rule as one reason for Japan's inability to change its strategy from relying solely on the WTO to a multilayered approach in which the WTO is complemented by FTAs. But I would argue that the real reasons include domestic conflicts of interest, together with a lack of prime ministerial leadership. What do you think is required to reconcile such conflicts of interests?

>> Is it not true that Japan should have shed its excessive concern about the formation of economic blocs and should have considered this as a possible national strategy, as Europe and the United States have done?

>> If we are to strategically implement FTAs and related trade policies, should we not establish a Trade Representative's Office under the direct control of the Prime Minister and put it in charge of this area, rather than the Ministry of Economy, Trade and Industry as at present?


AKAMATSU Masao (New Komeito)

>> You cited as a problem the fact that it took time for Japan to change its strategy from relying solely on the WTO to a multilayered approach in which the WTO is complemented by FTAs, but what are the arguments in favor of the current situation?

>> I would argue that the EU's integration process is not very relevant to Asia, which includes countries such as China with different political systems. Also, bearing in mind the presence of China, which is seen as having had a dampening influence on the ASEAN Free Trade Area (AFTA) that rendered it ineffective, can we be optimistic about an economic integration process in East Asia?

>> FTAs are presently being promoted in many regions, but is it not true that, for developing nations in particular, the growth of FTAs does not eliminate the North-South problem which dates from the Cold War era?


TAKEYAMA Yuriko (Liberal Party)

>> In promoting FTAs, what steps can be taken to overcome the territorialism among ministries that characterizes the present negotiation process? Also, to overcome this situation, is there not a need for the Prime Minister to exercise leadership?

>> In promoting FTAs, in addition to domestic deregulation, is it not important to eliminate regulations that apply to foreign trade?

>> You stated that even if we were to liberalize trade by promoting FTAs, certain products need to be protected for reasons of food security. Specifically, what are those products?


YAMAGUCHI Tomio (Japanese Communist Party)

>> What mechanisms do economic agreements like FTAs contain to protect the economic sovereignty or the economic base of individual nations?

>> In Mexico, although Mexico City is achieving economic growth, over half of the nation's small and midsized businesses are bankrupt, and Mexico's membership in NAFTA is said to be behind this. How do you view this situation?

>> The ASEAN nations have diverse social systems, levels of economic development, religions, and so on, and their economic union, AFTA, has been recognized by the WTO as a "group of developing countries." Under these circumstances, what is their reaction to Japan's participating in their economic integration process, for example, by concluding a free trade agreement with Singapore?

>> If FTAs expand and come to involve closer ties while at the same time coordination among WTO member nations is at an impasse, will there not be a change in the status of FTAs as a complement to the WTO?


KANEKO Tetsuo (Social Democratic Party)

>> In future, if Japan concludes FTAs with various countries, we can expect increasing international exchange of human resources. Are there any points in the Constitution that need to be improved regarding the human rights of non-Japanese nationals?

>> Is there not a risk that concluding FTAs will aggravate the hollowing-out of industry in Japan?

>> I think that developing closer ties of economic cooperation with the Republic of Korea and China by concluding FTAs, among other means, is important for security reasons also. What are your views in this regard?


NISHIKAWA Taiichiro (New Conservative Party)

>> I think that the fact that China is on the way to concluding an FTA with ASEAN within ten years, plus the existence of the EU and NAFTA, can be seen as the return of bloc economies. How do you view the "isolation" of Japan in this world context?

>> In forming a "regional economy" by such means as concluding FTAs, does Japan need to carry out "industrial adjustment," including adjustment of industries with weak international competitiveness, such as agriculture?

>> In future, as we conclude FTAs and other types of economic agreement with various countries, I believe there is a need for partnerships that extend beyond the economic sector into a wide range of fields. What are your views in this regard?


HIRAI Takuya (Liberal Democratic Party)

>> I think that FTAs are also meaningful in terms of "economic security." Do you agree with this view?

>> When Japan conducts negotiations with other countries, it seems to me that the division of roles between the Foreign Ministry and other ministries is unclear. What would you say to a division of roles in which, for example, the Foreign Ministry is in charge of "power politics" and other ministries are in charge of the various areas of "global governance," such as the environment, energy, and poverty?

>> I think that concluding an FTA with the Republic of Korea should have top priority among such agreements. What is your view of this?

>> What is the status of intellectual property rights in FTAs? Also, in concluding FTAs and similar agreements, what are the biggest problems in negotiations concerning intellectual property rights?


YAMADA Toshimasa (Democratic Party of Japan and Club of Independents)

>> I am not in favor of concluding FTAs, for reasons of protecting domestic industries, particularly agriculture, and preventing the hollowing-out of industry. However, I believe that it is possible to conclude an FTA with Singapore simply because the agreement has neither merits nor demerits for either side. How do you evaluate the FTA with Singapore?

>> Japan is already "isolated" with regard to FTAs, and no measures have been taken to enable us to hold our own amid the trend to FTAs. In light of this situation, rather than promoting FTAs, should we not take the position that the ill effects of shifting to bloc economies must be eliminated?

>> Rather than concluding FTAs, is it not more important to protect domestic industries and deal with the hollowing-out of industry?


ITO Shintaro (Liberal Democratic Party)

>> Have there been any cases of other countries revising their constitutions in order to conclude FTAs?

>> The Preamble of the Constitution refers to the "benefits" enjoyed by the people, a phrase which I think can be interpreted in different ways according to diverse values. For example, agriculture is an industry in some respects, but it is also closely related to the environment and to culture. Do you agree that to assess FTAs solely in terms of economic rationalism and to promote them from this viewpoint is not necessarily in accord with the "benefits" enjoyed by the people?

>> In concluding FTAs, have such things as carbon dioxide emission rights, exclusive economic waters, and fishing rights been taken up as issues?

>> If economic integration proceeds to an advanced stage and we partially transfer sovereignty to a third-party institution, how will the legitimacy of that institution's powers be guaranteed in relation to the popular sovereignty provided for in the Constitution?


NAKAGAWA Shoichi, Chairman of the Subcommittee

>> How do you view the fact that, in negotiating FTAs, the handling of agricultural products constitutes an impasse for all nations, not just for Japan?

>> In light of the spirit of the Preamble of the Constitution, which states that all the peoples of the world should live free from want, how do you view the relationship between FTAs and developing countries? Is it not true that, for developing countries, joining an FTA actually widens the economic gap with developed countries?


Main points of comments made by members of the Subcommittee (in order of presentation)

ITO Shintaro (Liberal Democratic Party)

>> The meaning of "benefits" in the Preamble of the Constitution is open to interpretation according to diverse values. Therefore, to promote FTAs from the single viewpoint of economic rationalism does not contribute to the "benefits" of the people, and can even be called unconstitutional.

>> If FTAs develop to the point where state sovereignty is partially transferred to an international institution, it will become essential to revise the Constitution.


SUTO Nobuhiko (Democratic Party of Japan and Club of Independents)

>> In studying FTAs, we must have both a global and a regional perspective. That is, we must weigh the globalism that underlies FTAs, together with the various assessments of globalism, and we must also consider such questions as what, in the event of further decentralization, should be the relationship between the central and local governments when differences in thinking arise between them.


YAMAGUCHI Tomio (Japanese Communist Party)

>> In dealing with economic issues, our approach must pivot on both a basis in the Constitution (the right to a peaceful existence, international cooperation, and so on), and a basis in international law (the right of self-determination and the equality of sovereign rights).

>> With regard to Japan participating in the economic integration of East Asia, there are problems to be resolved, including economic disparities and the aftereffects of the war, and difficulties can be foreseen, but we should address these in a spirit of equality and reciprocity.


KANEKO Tetsuo (Social Democratic Party)

>> Japan has traditionally made much of its relationship with the United States, but I think that relations with Asian nations will become important in the future.

>> In promoting FTAs, we should take into account the fact that agriculture is closely connected to Japan's traditions and culture and to environmental issues.


NAKAMURA Tetsuji (Democratic Party of Japan and Club of Independents)

>> Environmental problems will likely become important in the twenty-first century. Japanese agriculture evolved as part of a culture that values water resources, and I think that this perspective will be important in the future as Japan provides support for development in the third world.


HIRAI Takuya (Liberal Democratic Party)

>> Japan's position and role in the international community should be made clear not in the Preamble of the Constitution but in Article 9, and the promotion of FTAs should be regarded as an issue that lies on a continuum with this question.

>> Also, if FTAs are expanded and come to involve closer ties, from the viewpoint of maintaining common values as Japanese, we will have to debate Article 10, which concerns nationality.


YAMADA Toshimasa (Democratic Party of Japan and Club of Independents)

>> I believe that, given the existing Constitution and the U.S.-Japan Security Treaty structure, it is only to be expected that Japan has become isolated in the international community, and that this is proof of the existence of "shackles," or restraints on decision-making, in the Constitution.